Government support for agriculture in the world’s leading farming nations rose during 2012, bucking a long-term downward trend and reversing historic lows recorded in 2011, according to the latest version of an annual OECD report.
Public support to producers stood at an average one-sixth of gross farm receipts in the 47 countries covered in OECD Agricultural Policy: Monitoring and Evaluation 2013. The Producer Support Estimate has increased to 17% of gross farm receipts in 2012, compared to 15% in 2011, according to the new analysis.
The OECD sees a generalised move away from support directly linked to production, but finds that support that distorts production and trade still represents about half of the total. While OECD countries are increasingly de-linking support from production, emerging markets are relying more on border protection and market price support measures that tax consumers.
“With world markets for food and commodities buoyant and higher commodity prices expected to continue, the time is ripe for governments to credibly commit to wide-ranging farm support reform,” said OECD Trade and Agriculture Director Ken Ash. “Meeting the needs of a growing and richer world population requires a shift away from the distorting and wasteful policies of the past towards measures that improve competitiveness, allowing farmers to respond to market signals while ensuring that much-needed innovation is fully funded,” Mr Ash said.
This year’s OECD report examines the state of agricultural policy in 47 countries that account for nearly 80% of global farm output, including seven emerging economies that are major players in food and agriculture markets: Brazil, China, Indonesia, Kazakhstan, Russia, South Africa and Ukraine. It shows that support levels vary widely, both across the OECD countries and across major emerging economies.
In the OECD area, support to producers stood at $258.6 billion (EUR 201.2 billion) in 2012. Support represented 19% of farm receipts in the OECD, up from 18% in 2011. The report points to sharp divergences behind these figures, with the countries that offer farmers the highest levels of support recording increases (Japan 56%, Korea 54%, Norway 63% and Switzerland 57%) while relatively low-support countries fell further (Israel 11%, Mexico 12%, United States 7%). Support remained very low in others (Australia 3%, Chile 3%, New Zealand 1%).
The European Union mirrored the OECD-wide trend, with farm support rising from 18% to 19% of farm receipts. The June 2013 agreement on EU’s Common Agricultural Policy for the 2014-20 period does not represent a major departure from either the current orientation or size of farm support in the 28 country bloc.
Some emerging economies which are key players in agriculture continued to increase support – in China farm support rose to 17%, in Indonesia it rose to 21%, and in Kazakhstan support reached 15%. Others maintained low levels of support, like Brazil (5%) and South Africa (3%).
Some of the sharpest increases in farm support have occurred in countries that have turned their policy focus to self-sufficiency. The OECD sees only weak links between higher self-sufficiency and improved food security, particularly in less developed economies. Access to food would be more effectively improved by reducing poverty and developing safety nets, the report said. Multi-faceted efforts are also needed to increase investment, which would raise domestic production, improve access to imports (and to export markets) and create emergency food reserves.
Public investments for the sector overall should receive more attention. Innovation policy is key to improving farm productivity. Investments in research and development, technology transfer, education, and extension and advisory services have high social returns in the long run. Expenditures on other general services to the farm sector, such as food safety and food quality assurance systems, also contribute to long-term profitability, competitiveness and sustainability.
Further de-linking of farm support and production is necessary. Even where a large share of support is now delinked from production, payments tend to be based on past entitlements or on farm area, and as a result favour the largest farms. There is considerable scope to re-orient spending towards specific goals such as those related to low incomes, rural community well- being and environmental sustainability.
For further information, see: Agricultural Policy: Monitoring and Evaluation 2013.